TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Commercial papers for investors, not speculators
Commercial paper should only be issued by companies with a good track record and a good credit rating.
Change Size
Jakarta traffic at night. (Shutterstock/File)
T
he central bank, Bank Indonesia (BI), is looking for the right formula to cope with liquidity risks in the domestic financial market.
The latest challenge is a further increase of United States benchmark interest rates for the rest of the year. Normalization of the US Federal Reserve’s balance sheet will push up the Fed rate faster than before.
However, the mobility of hot money is unpredictable, and can suddenly reverse and exit the domestic financial market.
In BI’s view, while the domestic economy is entering a period of low inflation, it is time for the central bank to focus more on liquidity rather than changing the policy rate to mitigate external turmoils.
As a result, starting next year, BI will facilitate the corporate sector to issue commercial paper.
According to a BI regulation signed on July 19, companies are allowed to seek funds in the money market through the issuance of commercial paper. BI’s policy offers a new, alternative financing source amid difficulties in obtaining capital.
So far, the corporate sector has sought public funds through initial public offerings (IPOs), rights issues or bonds to meet long-term funding needs.
